Nonfungible tokens (NFTs) are finally on the most infamous privacy-focused blockchain, but not everyone is happy about it. Mordinals, or Monero Ordinals, are similar to Bitcoin Ordinals in that they allow anyone to inscribe data alongside transactions stored on the Monero blockchain.
From reduced privacy on the network to storing illegal content on an undeletable database, the Monero community is throwing around many concerns — but is there really anything to worry about?
What are Mordinals?
In January, Casey Rodarmor launched the Bitcoin Ordinals protocol, allowing anyone to inscribe arbitrary data alongside Bitcoin transactions. This enables users to attach data to a single satoshi. The Ordinals protocol keeps track of these satoshis, the linked data and their unique identifiers, facilitating nonfungible tokens on the network.
Mordinals are essentially a modified implementation of Ordinals on the Monero blockchain. While Ordinals require data to be stored in the “witness” part of a Bitcoin transaction, Mordinals use the “tx_extra” field that exists within each Monero transaction. This has technically been possible on Monero since 2014, but until now, there has been no support for it.
Criticisms against Mordinals closely mirror those levied against its Bitcoin counterpart, but with an additional focus on how it could impact Monero’s privacy. The Monero community values privacy above all else, and introducing NFTs on a network that strives to make its tokens as unremarkable as possible was never going to be easy.
To protect user privacy, Monero transactions are signed using “ring signatures,” which bundle a transaction with a set of fake ones. If an attacker with enough capital flooded Monero blocks with Mordinals, it would be trivial to distinguish actual transactions from the dummy NFTs. This is a genuine concern for Monero.
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In 2020, the United States Internal Revenue Service offered a $625,000 bounty to anyone who could help track Monero transactions, so it’s safe to say there’s a market for conducting such attacks.
Another common criticism against Mordinals is its potential impact on decentralization. As blocks get bigger, storage requirements for nodes increase, disincentivizing smaller nodes from staying online.
Of course, the protocol could be upgraded to allow nodes to prune these transactions. However, a blockchain relies on its nodes agreeing on the network’s state, and filtering out certain blocks or transactions could be construed as censorship.
Are Mordinals really that bad?
Monero, unlike Bitcoin, has a dynamic block size, and the idea that Mordinals might cause the blockchain to expand abnormally is a legitimate concern in the Monero community. However, looking at on-chain metrics, it doesn’t appear that blocks are growing wildly faster.
Also, while Mordinals’ impact on privacy shouldn’t be taken lightly, some argue that the risks can be fixed through updates.
In a Twitter thread on Mordinals, Cake Wallet vice president Justin Ehrenhofer said that Monero should take steps to limit certain behaviors, as it has done for other privacy and fungibility risks. “The Monero network is strong because the privacy, security, and efficiency of XMR is prioritized first and foremost. Everything else needs to play nice with that goal,” he tweeted.
I don’t like to blame people for using a network in a way that’s allowed, but the Monero network should take steps, as it has done for other privacy and fungibility risks, to limit certain behaviors. A
— Justin Ehrenhofer ️ (@JEhrenhofer) March 17, 2023
In light of the privacy implications, he believes the best course of action is to limit the size of the tx_extra field within Monero transactions to 256 bytes. This could significantly increase the attack cost of flooding the network with dummy transactions while providing flexibility for future use cases.
“Some Monero holders view NFTs as a threat to privacy,” Apollo Greed, CEO of gaming merchant service firm QGlobe Games, told Cointelegraph. “Others recognize its potential value and believe that privacy can be maintained.”
According to Greed, there’s enormous potential for privacy-conscious NFTs in protecting financial data while selling in-game assets.
There’s also the possibility of Monero being used to store and sell illegal content. As an uncensorable privacy-focused blockchain, this could have dire consequences. But this has always been possible on Monero, though prior to Mordinals, this would have required some technical experience using Monero’s command-line interface.
There’s no doubt NFTs have drawn a lot of attention. Bitcoin (BTC) has nearly doubled in value since the introduction of Ordinals, and while there are undoubtedly other factors impacting its price, Ordinals has significantly raised activity on the network. By storing data on the blockchain instead of on the internet or InterPlanetary File System like most Ethereum-based NFTs, Mordinals (and Ordinals) could help lead to increased utility for NFTs.
What’s next for Mordinals
In the Twitter thread mentioned above, Ehrenhofer said the concept of Mordinals was always a known possibility and was recently spurred by the success of Ordinals on Bitcoin and Litecoin.
The debate on what to do with tx_extra has been ongoing for years, and the community appears to have at least partially aligned itself with the Ehrenhofer, having since merged a patch to limit tx_extra’s size to 1,060 bytes. While it’s still four times larger than his suggestion, this still makes it much harder for someone to attack the network.
On the one hand, tx_extra exists to ensure future interoperability with decentralized applications and other blockchains. The alternative, removing tx_extra and adding a specialized field that cannot be abused, could kill certain projects in development, like the upcoming Serai DEX.
No one knows who created the Mordinals software, and there’s a theory that the entire project is a stunt being pulled by someone within the Monero community to lobby for the removal of tx_extra. During an episode of the Monero Talk podcast, community member Ofrnxmr spoke about a post he saw on the Monero Research Lab (MRL) forums by a user named “Tx_extra” in late 2022.
The user suggested removing the tx_extra field from Monero transactions, and when no action was taken, they began uploading MRL logs to Monero in a similar fashion to how Mordinals works. When asked to stop, they again raised the topic of removing the tx_extra field.
Even if this theory is true, completely preventing users from storing arbitrary data on blockchains will never be possible.
A 2017 study funded by the German Federal Ministry of Education and Research shows how Bitcoin has been used to store illegal content and share malicious code since long before Ordinals existed
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When Ordinals launched, Rodarmor wrote about two key missing features required for NFTs to thrive on Bitcoin: provenance and markets. Provenance is the ability to determine who owns an inscription, and markets are necessary venues for NFTs to be bought and sold.
These features go against Monero’s broader ethos of anonymity and decentralization. There are parts of the community who would love to see Monero compete with the likes of Bitcoin and Ethereum, but as long as the network’s values conflict with how NFTs are valued, Mordinals are unlikely to gain much traction without introducing some serious utility.